Reversing course on a policy strongly supported by environmental activists, Oregon Gov. Ted Kulongoski (D) has announced his support for cutting runaway subsidies for wind and solar power projects.
Kulongoski’s announcement signals a change of heart after he was lambasted by both political parties for vetoing a bipartisan 2009 bill intended to cut fraud and waste associated with renewable power subsidies.
Spiraling Subsidies, Deficit
Under a law enacted in 2007, Oregon gives solar power projects up to $20 million apiece in tax credits over the life of the project. Wind power projects are given up to $10 million each. The tax credits allow companies to recoup up to half the cost of each project.
When the Kulongoski administration proposed the tax credits in 2006, state officials told the legislature the program would cost roughly $1 million per year over its first five years. The program actually cost the state $23 million per year in 2007-09, with rapidly escalating costs likely to put the program’s total cost at $167 million–an average of $35 million per year–by 2011 when the program reaches five years old.
The out-of-control subsidies have become a primary factor in the state’s growing budget deficit, which has forced the legislature to raise taxes and cut spending on education and other core programs.
“When the [tax credit] was introduced, the state was in a much better position financially than it is now, and the governor wanted to encourage green energy projects like wind power and such,” said Prof. William Lunch, chair of the Department of Political Science at Oregon State University and chief political analyst at Oregon Public Radio. “Now Oregon is in much worse economic shape than when this program was originally enacted.”
Supporters Low-Balled Costs
A 2009 series of investigative reports by the Portland Oregonian uncovered evidence state officials deliberately low-balled the expected cost of the tax credits. Documents obtained by the Oregonian under the state’s public records law showed Kulongoski’s staff had determined the program would cost many times more than the $1 million per year price tag the administration reported to the legislature.
“There have been many exposés showing that the numbers used to sell the program to the legislature were either cooked or inaccurate,” Lunch said. “It has been alleged that the numbers used to make the case for this tax credit were low-balled.”
In addition to costing far more than advertised, the subsidies have delivered few benefits. Records show millions of dollars have been given to failed companies that produced little or no renewable power.
“Whether one wants to believe Gov. Kulongoski was working with inaccurate numbers or that he or perhaps his staff cooked the numbers, it is clear it has become a more expensive program than originally anticipated,” Lunch said.
Thomas Cheplick ([email protected]) writes from Cambridge, Massachusetts.